BANGOR – The bankers, politicians and nonprofit officials behind a new, $9.5 million low-interest loan program for small and medium-sized businesses in Maine are hoping they have hit upon a way to give the state’s economy a much-needed lift.
“This is an economic stimulus package that’s good for Maine,” said John Edwards, executive vice president and chief banking officer of Bangor Savings Bank, which will underwrite the loans. “This isn’t a bailout program. This is something that’s very, very unique.”
Edwards spoke at a press conference held Thursday afternoon at the Eastern Maine Development Corp. office in Norumbega Hall to announce creation of the Maine New Markets Loan Fund program.
Bangor Savings Bank and the nonprofit Coastal Enterprises Inc. have worked for two years to create what they call a “first in the nation” partnership between a nonprofit and a community bank to provide smaller loans through the Maine New Markets Loan Fund. These are loans of less than $2 million for businesses, nonprofit organizations and other groups that want to expand or move into economically distressed areas.
Those areas are determined by the U.S. census and are located in Maine’s “rural rim” counties including Washington, Aroostook and Piscataquis, and also in disadvantaged metropolitan areas including parts of Bangor, Rockland and Orono.
The loans may be used to acquire, construct, rehabilitate, purchase or make additions to business-related real estate. They also may be used to purchase long-term capital assets or equipment, but can’t be used for working capital.
“This innovative approach could not come at a better time as our small businesses are falling victim to tightening credit due to the weakening economy,” said U.S. Sen. Olympia Snowe in a statement read by a staff member at the press conference.
The loans are made possible through Coastal Enterprises Inc.’s acquisition of U.S. Department of Treasury New Markets Tax Credit funds. Until now, the New Markets Tax Credit program only made possible larger loans of $2 million or more to businesses in Maine – even though the state has a high proportion of smaller businesses.
“I understand how important small businesses are,” said U.S. Sen. Susan Collins in a statement read by her representative. “Small businesses employ more than half of all Americans … and families and businesses throughout Maine and the nation are struggling to make ends meet during these difficult economic times.”
The $500,000 to $2 million loans feature lower interest rates than are commercially available and a longer-than-usual term of 25 years so that businesses will have lower monthly payments, Edwards said. In exchange for making these loans, the bank will receive a 39 percent tax credit to help offset the bank’s risk – and also will reap other benefits of helping out the state’s economy.
“It’s good for the bank,” he said. “Bangor Savings Bank kind of lives and dies on how the Maine economy does … and obviously, what’s good for the Maine economy is good for the bank.”
Coastal Enterprises Inc. was selected in October by the U.S. Department of Treasury to be among 70 organizations that would distribute the $3.5 billion in New Markets Tax Credit funds in low-income communities. Snowe co-sponsored the legislation to make the program possible.
“The idea is to create community development projects and stimulate activity,” said Charles Spies, managing director of CEI Capital Management LLC, a subsidiary of Coastal Enterprises Inc.
The loan program’s co-sponsors stressed that they’ve been working on this for two years – well before the start of the current economic meltdown – but admitted that the timing is good for Maine.
“It’s really an economic stimulus,” Edwards said.
For more information, contact any loan officer at CEI or Bangor Savings Bank.